Prof. Linda Galler Quoted in Law360 Story on Privilege Waivers in Tax Court

[The Investment 2000 Fund LLC v. Commissioner] ruling was reinforced earlier this year in an April order in Eaton Corp. v. Commissioner, in which the Tax Court said the IRS was entitled to review six tax opinion letters written by Eaton’s lawyers even though the company said it relied on self-determination to meet the reasonable basis exception to penalties assessed by the agency.

Linda Galler, a professor at the Maurice A. Deane School of Law at Hofstra University and senior tax counsel at Curtis Mallet-Prevost Colt & Mosle LLP, said the Eaton order was a broad statement by the court.

“Simply by asserting a reasonable cause defense, the taxpayer put at issue all of its experience and knowledge and state of mind,” she said.

The order showed that an attorney representing a client that is under audit or in litigation has to seriously consider privilege issues in deciding whether the client wants to raise a reasonable cause defense, she said.

Here, Law360 provides three steps attorneys should take to navigate privilege waiver issues in Tax Court.

Control Information

Even before a client is audited or gets caught up in litigation, attorneys need to think about privilege issues when giving tax advice, Galler said. The greater the likelihood that the client will ultimately end up asserting a reasonable cause and good-faith defense in court, the more likely it is that that document or that advice will have to be turned over, she said.

“When one gives a tax opinion, and perhaps when one provides any sort of written advice, one can’t assume that that document or that advice will be privileged,” Galler said.